The idea of $100 per barrel oil may not seem so crazy following actions this weekend by Venezuelan leader Hugo Chavez. The leader believes that the CIA or some other branch of the USA is attempting to influence elections in his country in order to turn popular opinion of him, which is already weighed. Consequently, he noted in a letter that he is prepared to cut the supply of oil to America if he finds evidence to support his claims – evidence which may not have to be real.

Venezuela currently provides the USA with approximately 1.3 million barrels of oil and other petroleum products per day and any cut in this number could significantly jump oil prices. Those that believe he would not take such action believe that it would hurt his economy too much to do so as many social programs he has in place depend on the country’s rich oil revenues. However, many others believe that the leader may just be crazy enough to pull it off – at least for a short time.

Let’s put this into prospective. Last week, there was an explosion on a pipeline connecting Canada’s oil with the United States that jumped oil over $4 despite the fact that it could be repaired in a matter of days. The idea of 1.3 million barrels going missing for an undefined period of time could make a substantially larger impact on the price and potentially bring it past $100 a barrel if not much higher.

So, how likely is this cut? Well, Hugo Chavez recently proposed a series of changes to his country’s constitution that would essentially convert the country into a totalitarian state from a democracy. Much of his public support stems from social programs that are highly dependent on oil revenues to sustain. So, many argue that any cut in this funding – even if for a short time – would harm the income from these operations. Meanwhile, others insist that he could turn this around and blame the United States for any economic damages that came as a result.

In the end, we know that Hugo Chavez is probably crazy enough to make such a cut but it would come at a steep cost and be somewhat risky. This means that the cut would probably not last for long. Regardless, the inevitable rise in oil prices may be of great concern for investors who are already worried about cuts in consumer spending and the economy as a whole. Combined, these factors make the political situation in Venezuela worth watching!